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Europe update: European Tax Free Shopping returns to growth

Global Blue’s Tax Free Shopping (TFS) sales performance has returned to growth in Europe for the first since December 2015, continuing the stabilisation of the European TFS market and painting an optimistic picture for 2017.

Month to date sales growth of +3% in December follows two months of stability during October (0%) and November (0%) – a marked improvement on the region’s performance against the first three quarters of 2016. This growth was largely driven by increased spend across all nationalities (+4% month to date), while transactions remained flat (0%).

This stabilisation in performance can be attributed to a number of factors, including the softening of the euro and British pound against the US dollar, and the easing of macro headwinds in the top three globe shopper origin markets; China, US and Russia.

France returns and UK TFS remains strong

December saw significant improvement from the French TFS market, which returned to growth after months of slow performance. French sales in store were up by +21% month to date (vs -19% in November), driven by an increase in both average spend (+3%) and transactions (+17%). This improvement is supported by a low base of comparison against the same period in 2015.

The UK has seen strong growth since June’s referendum vote and this continued in December with month to date sales up by +25%, driven by a +12% increase in average spend and +11% rise in transactions. December performance was also boosted by the large swathe of UK retailers that opted to go into sale earlier than usual, boosting sales throughout the month.

With the value of the pound falling further last week over fears surrounding a ‘hard’ Brexit, the UK’s looks set to become an increasingly desirable shopping destination for the foreseeable future. However, this momentum could be slowed by the potential adjustment of pricing from major UK department stores, as they raise prices to compensate for the weak pound

After a difficult 2016, the stabilisation of the Italian TFS market continued in December, with sales in store of -8% representing a marked improvement against November (-16%) Meanwhile, Germany’s TFS sales performance is back to double-digit decline (-13%) following the recent terror attacks that rocked Berlin in December.

Improvement from key globe shopper nations

American shoppers performed strongly in December, posting impressive +20% sales in store growth as domestic confidence and a strong dollar saw US transactions up by +13%.

Russian sales also increased, up +2% last month, as the country’s recovering economy and improving international status continued to drive the value of the ruble and boost European TFS performance.

Global Blue saw the performance of Chinese globe shoppers continue to improve across the region, as growing domestic confidence further bolstered by the impact of a softening euro and British pound. While Chinese sales in store were not back to growth, they continue to stabilise at -2% (vs -5% for November). Promising travel bookings for Chinese New Year 2017 could further strengthen this stabilisation over the next couple of months.

While December saw a fall in European transactions from Gulf countries continue (-12% vs -10% in November), total sales in store growth from this group remained positive (+1% month to date) thanks to increased average spend, driven largely from department store spend in the UK.

Global Blue takeouts:

• December saw European tax free sales performance in positive growth for the first time since 2015, indicating a continued stabilisation of the luxury sector.

• Europe saw improvement from top three globe shopper nations across all key markets, with increased average spend driving positive sales in store growth.

• Sales improvement was driven largely by strong months for the UK and a resurgent France, posting sales in store of +25% and +21% respectively.